Tax Savings: A 1031 exchange allows you to exchange your property for another and defer the payment of federal and state capital gains taxes. This allows you to preserve your hard-earned equity and in effect, reinvest the tax you owe as an interest-free, no-term loan from the government.

Income: You can increase cash flow. An example of this would be exchanging out of bare land and into an income producing property.

Leverage: The investor who intends to own real property would naturally want to use all of their equity from the sale of investment property to acquire replacement investment property. The 1031 exchange helps you build wealth more rapidly by allowing you to use all of your equity rather than losing a portion through taxes.

Diversification: A 1031 exchange opens doors for diversification. One can achieve geographical diversity by exchanging into investment properties in different regions of the country. Another alternative for diversification is acquiring a different property type such as exchanging some of your single family residential units to a retail strip center.

Management Relief: Many investors often accumulate several single family residences over the years. As a result, they may find themselves in a management-intensive and time consuming situation. The 1031 exchange provides a viable solution by allowing you to exchange these smaller properties for one larger property.

Co-Ownerships: Through an exchange, you could divest yourself of problem co-ownerships by exchanging joint interests for sole interests in separate properties.